New Global Bond Fund now available in Magnet and Compass

As part of the investment management process for the Magnet and Compass range of funds Friends First have recently added a new component fund, specifically the SSGA Global Aggregate Bond Index Fund. This fund replaces the BMO Fixed Interest Fund and the SSGA Indexed European Government Bond Fund, both of which invested exclusively in Eurozone Government Bonds.

Why include Fixed Income in a Portfolio?

Income

As the name would suggest, fixed income refers to a type of investment that provides a return in the form of periodic payments and the eventual return of principal at maturity. A bond’s coupon payments constitute a reliable stream of payments.

Capital Preservation

Fixed income securities issued by investment grade entities such as sovereign governments, corporations and financial institutions are an important source of capital stability. By definition, principal is to be repaid upon maturity of the security, specifically for higher rated issuers with strong credit ratings it provides an effective form of capital preservation.

Reducing Volatility

Fixed Income has demonstrated and delivered a lower-risk investment over time, provided diversification from equities and thus a degree of protection in equity downturns. Historically correlation between stocks and bonds has been close to zero; by combining low or negatively correlated assets, a portfolio’s expected volatility may be reduced.

Diversification

Because bonds generally may not move in tandem with stock investments, they help provide diversification in an investor’s portfolio.

Why The SSGA Global Aggregate Bond Index Fund?

Fixed income is a broadly diversified asset in itself. Introducing the Global Aggregate Bond Indexed Fund can also help enhance investors’ core bond holdings by seeking to deliver additional country and interest rate risk diversification. With historically low interest rates in Europe, investing globally may provide return and diversification opportunities by offering exposure to regions where yields are more attractive and/or monetary policy is more supportive.

A globally diversified bond portfolio is likely to be better positioned to weather large year-over-year market gyrations and provide a more stable set of returns over time. An indexed fund allows to access the return of a broad universe of fixed income securities in a cost effective way, which is particularly relevant in the current low-yielding environment.